Correlation Between Kukdong Oil and Dongnam Chemical
Can any of the company-specific risk be diversified away by investing in both Kukdong Oil and Dongnam Chemical at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kukdong Oil and Dongnam Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kukdong Oil Chemicals and Dongnam Chemical Co, you can compare the effects of market volatilities on Kukdong Oil and Dongnam Chemical and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kukdong Oil with a short position of Dongnam Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukdong Oil and Dongnam Chemical.
Diversification Opportunities for Kukdong Oil and Dongnam Chemical
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kukdong and Dongnam is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Kukdong Oil Chemicals and Dongnam Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongnam Chemical and Kukdong Oil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kukdong Oil Chemicals are associated (or correlated) with Dongnam Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongnam Chemical has no effect on the direction of Kukdong Oil i.e., Kukdong Oil and Dongnam Chemical go up and down completely randomly.
Pair Corralation between Kukdong Oil and Dongnam Chemical
Assuming the 90 days trading horizon Kukdong Oil is expected to generate 7.6 times less return on investment than Dongnam Chemical. But when comparing it to its historical volatility, Kukdong Oil Chemicals is 1.32 times less risky than Dongnam Chemical. It trades about 0.08 of its potential returns per unit of risk. Dongnam Chemical Co is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 3,145,000 in Dongnam Chemical Co on October 22, 2024 and sell it today you would earn a total of 280,000 from holding Dongnam Chemical Co or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kukdong Oil Chemicals vs. Dongnam Chemical Co
Performance |
| Timeline |
| Kukdong Oil Chemicals |
| Dongnam Chemical |
Kukdong Oil and Dongnam Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kukdong Oil and Dongnam Chemical
The main advantage of trading using opposite Kukdong Oil and Dongnam Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kukdong Oil position performs unexpectedly, Dongnam Chemical can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dongnam Chemical will offset losses from the drop in Dongnam Chemical's long position.| Kukdong Oil vs. Samlip General Foods | Kukdong Oil vs. iNtRON Biotechnology | Kukdong Oil vs. Cheryong Industrial CoLtd | Kukdong Oil vs. Namhwa Industrial Co |
| Dongnam Chemical vs. Lotte Data Communication | Dongnam Chemical vs. Jeju Beer Co | Dongnam Chemical vs. Sungmoon Electronics Co | Dongnam Chemical vs. PJ Electronics Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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